What is a Redraw Facility?

Some home loans come with features and benefits like a redraw facility. But what exactly is a redraw facility? Find out everything you need to know about how redraws work in Australia below.

Our friendly team of mortgage brokers can help you decide which features and benefits, including redraw facilities, are right for you. Contact us today for more information.

What is a redraw facility?

A redraw facility is a feature offered on some home loans that allows you to access any extra repayments you may make on top of your mandatory monthly repayments.

How does a redraw facility work?

Some home loans, usually variable rate home loans, will allow you to make extra repayments towards your home loan in addition to your compulsory monthly repayment. Borrowers will often do this in order to pay off their home loan faster–saving money on interest in the process. A redraw facility allows you to access these extra repayments.

It’s important to note that a redraw facility only allows you to access extra repayments you make towards your home loan. This does not include your compulsory minimum repayments.

For example, imagine your minimum monthly loan repayments are $2000, and you make an additional repayment of $100 per month, for 12 months.

At the end of that 12 month period, you would have a balance of $1,200 available to withdraw in your redraw facility. The funds you withdraw from your redraw facility can be spent as you wish.

Conditions on redraw facilities

Some lenders may have set conditions around redraw facilities, such as:

• Minimum and maximum limits on the amount of money you can redraw
• Restrictions around the number of times you can redraw each year
• Charging a fee for accessing your redraw facility.

Generally, most lenders will only offer a redraw facility on variable rate home loans and it is not a feature offered on fixed rate home loans. Though this will depend on each lender’s individual home loan products and policies.

If you have a fixed rate home loan, but you’re interested in a redraw facility, contact our mortgage brokers today. We can review your existing home loan to ensure you’re getting the best deal for your individual circumstances. Contact us today to make sure you’re getting the most out of your home loan!

How do I access my redraw funds?

How you access your redraw funds will depend on each individual lender. However, generally, lenders will often provide an online portal, such as internet banking, which borrowers can use to access their redraw facility.

Your lender may also provide you with a redraw request form to make a withdrawal request, or you can contact the lender directly.

Redraw vs offset: what’s the difference between an offset account and a redraw facility?

Both a redraw facility and an offset account are home loan features that are generally associated with variable rate home loans.

As mentioned above, a redraw facility allows you to access the extra repayments you make towards your home loan.

An offset account, however, is a transaction account that is linked to your home loan. The balance of your offset account is offset against the remaining balance owing on your home loan.

Both a redraw facility and an offset account can help you reduce the time it takes to pay off your home loan, reducing the interest you pay and saving you money over the length of your home loan.

If you’re unsure which feature is right for you, our expert mortgage brokers can help. We look at your individual circumstances and apply a personalised approach so we can offer you the best advice for your situation. Contact us today for a chat with one of our friendly team members today.

Redraw when refinancing

Refinancing your home loan essentially means you are paying out your existing home loan and taking out a new loan with different terms and conditions.

What happens to your redraw facility when refinancing largely depends on your lender and their terms and conditions. If you refinance with the same lender, your redraw funds may transfer to your new loan. If you refinance to a new lender, it is possible they may honour your redraw balance but under their own terms and conditions.

However, it is possible that you may lose access to your redraw funds altogether when you refinance so it’s best to speak with the lender or your mortgage broker to discuss the processes involved.

Mortgage brokers at Oceania Finance specialise in refinancing home loans and are experts at negotiating with lenders to get you the best rates and terms for your situation. Contact us today for more information.